Sony Pictures Rebounds

For even the shrewdest movie executives, picking projects that will resonate with today' s finicky audiences is a hit-or-miss proposition. Those who are mining the 2006 box office results for ways to raise their average might consider lifting a page from the Sony Pictures script.

Since launching its colossally successful Spider-Man franchise in 2002, the movie studio has racked up at least $1 billion in North American box office revenues annually, even in years when the web-spinning superhero was on a hiatus. That streak was in jeopardy last year after a string of pricey flops (Remember Lords of Dogtown, Stealth and Deuce Bigalow: European Gigolo?). Although Sony wound up hitting the $1 billion mark, it sank to third in the year-end rankings, putting it out of the top two places for the first time in the Spider-Man era. "Last year was something of an aberration," says William Drewry, an analyst at Credit Suisse. "Sony didn't have a big franchise film and it didn' t have many other films that worked either."

In short order, however, it has rebounded to set an industry record by releasing 12 movies that opened in first place. Among them: The Da Vinci Code, Click, The Pink Panther and Talladega Nights: The Ballad of Ricky Bobby. The hit parade has put Sony back atop the box office heap this year, with over $1.3 billion in domestic revenues already on the books and several high-buzz flicks--including the just-released Bond remake Casino Royale and next month's The Pursuit of Happyness starring audience favorite Will Smith as a homeless father--expected to add significantly to that total. ( Spider-Man 3 unspools next spring.)

Most of this year's big grossers were in were in the production pipeline long before the 2005 books were closed and were "good stories with the potential to resonate with audiences here and abroad," according to Michael Lynton, chairman of Sony Pictures Entertainment. "We were confident they would work," But to raise the odds of success, Sony's domestic and international marketing operations were overhauled and management oversight of projects intensified. In the case of February's remake of The Pink Panther, studio chief Amy Pascal ordered reshoots and re-edits to the director's cut that made Steve Martin's Inspector Clouseau less lascivious and more laughable. The comedy earned a PG rating, a wider audience and an $82 million domestic gross.

On the financial side, along with cutting back the number of deals with independent producers, Sony kicked the habit of blithely paying stratospheric salaries to marquee names. That strategy worked in past years if the star vehicles achieved blockbuster status. But when theater attendance plummeted and studios had to hike marketing spending to combat competition from iPods and Internet downloads last year, profit margins on such projects vaporized. In negotiating Cameron Diaz' s salary for next month' s romantic comedy,The Holiday, for instance, sources say Sony persuaded the actress--who got a reported $20 million to headline its Charlie's Angels: Full Throttle in 2003--to accept cash up front and a share of the revenue after the studio covered its production and marketing costs, rather than a percentage of the box office take from opening day forward.

Sony's tinkering clearly worked this year. But that doesn't mean achieving consistent success is about to get any easier for any studio. "You try to insure that you're as well positioned as you can be," says one movie executive. "But because the environment is so competitive and vola> tile, there's no predictability anymore."